x Abu Dhabi, UAEThursday 27 July 2017

US car market cruising along smoothly as Detroit shifts into top gear

The US car market's rebound may be slowing - but it still looks like the best bet to many of the global industry's top brass as they converge on Detroit.

The North American International Auto Show starts tomorrow in Detroit. REUTERS / Rebecca Cook
The North American International Auto Show starts tomorrow in Detroit. REUTERS / Rebecca Cook

The Detroit auto show, one of the car sector's major events of the year, opens for media members tomorrow, as the US industry enjoys the type of demand it has not experienced since 2007. The event is an opportunity for car makers to unveil upcoming models at a venue expected to draw almost 6,000 journalists and up to 800,000 visitors. Key debuts this time include a new Chevrolet Corvette, a Lincoln MKC crossover concept and the Toyota Furia concept sedan.

Another focus will be the outlook for industry growth this year. The US car market's rebound may be slowing - but it still looks like the best bet to many of the global industry's top brass as they converge on Detroit.

With Europe in a protracted meltdown and some emerging markets flagging, the United States will increase its share of world car sales this year even as its economy cools, analysts and executives predict.

American light vehicle sales are expected to rise 4 to 7 per cent with prices remaining strong, according to most estimates. That would outpace the 2.6 per cent global expansion forecast by the consulting firm LMC Automotive.

That is an alluring prospect for European brands fleeing the carnage at home and Japanese car makers hurt by a politically driven consumer backlash in China - where growth and pricing are less predictable for everyone.

"Even if China overtook the US as our biggest-volume market, the US is and will remain our second-most important market after Germany," said the Porsche chief executive Matthias Mueller.

The Volkswagen-owned sports car maker thinks Europe would be "lucky" to recover before 2015, added Mr Mueller. "The situation is as critical as ever."

The European market, already near a 20-year low, will shrink another 1.7 per cent this year to 17.8 million light vehicles, LMC predicts, while the US grows 4.2 per cent to 15.1 million.

Although rising more sedately than last year's 13.4 per cent surge, projected US deliveries will account for 18.2 per cent of the 82.7 million global total, compared with 17.9 per cent last year.

"Right now, the US is the healthiest auto market in the world," said John Casesa, a senior managing director with Guggenheim Securities.

Sales growth will be close to zero in Brazil and will slow to 3.4 per cent in Russia, according to the same forecasts, while China's expansion accelerates to 10.2 per cent from 5.9 per cent.

But with Chinese manufacturing capacity for 1.5 million additional vehicles coming on stream, some analysts warn that pricing and profitability could suffer this year.

Balancing China's enormous growth potential, "a certain amount of unsteadiness is a factor", said Mr Mueller.

Japanese car makers are still smarting in China, where public outrage over a territorial dispute has translated into more than 100,000 lost sales for Toyota and Nissan since September.

That can only increase their appetite in the US - where car sales by Asian and European brands both averaged 22 per cent growth, compared with a 12 per cent gain for domestic nameplates.

The yen's recent decline against the dollar will also give Japanese imports more edge, acknowledged the General Motors co-chief executive Dan Akerson.

"People are going to be very competitive in this market," said Mr Akerson. "This is the market with the best margins." While GM lost ground last year, it has broadly "held the line" since emerging from bankruptcy in 2009 and will soon benefit from the renewal of its ageing lineup, added Mr Akerson.

Meanwhile, Ford is also cautiously optimistic about this year, the company's chief economist said last week.

* Reuters